Why am I not financially independent?

Friday, Sept 08 2017,

Need for more wealth is never ending. We want to be wealthy, free from stress, free from monthly rents, mortgages and wish to pursue our passion. But the irony is, only a few from the lot are able to achieve financial freedom. It's not that we don't work hard, we all do, but something is wrong somewhere and we don't really handle it well. Why can't we be wealthy in spite of the struggles that we go through each day even after years? We often wonder what is it that the wealthy do and we are not doing?

For becoming wealthy, you have to earn, save, invest, and thus multiply what you earn. We all know this, however there are some personality traits which are becoming boulders in our way to success. Today we will talk about some of these traits...

Procrastination: We fail because we do not start on time, we keep on waiting for the right time, not realizing that if we do not start, the probability of winning is zero. Most of us are in the 'planning to invest' stage since ages, but this planning never ends, and we seldom move on to the next stage of 'executing'. We know that we have to invest to save tax, to meet our future goals, to build wealth, but there is something stopping us to actualize it. '“I'll start an ELSS SIP this year”, and I say this each year', is the problem.

Band Wagon: My neighbour is rich, I'll do what he is doing; This is a common problem, if my neighbour is doing well in his car modifying business, I'll also want to do the same business, not realizing the fact that he is a mechanical engineer, he has a passion for cars and it's not there in my blood. We have to identify what we are good at, what excites us, and then choose our career. This starts from our education and extends to our career, If economics excites you, don't take computer science because it is more popular, and all your friends are choosing CS.

Lack of well framed goals: We want to achieve a lot, but if someone asks us what do you want to do in life, or how do you see yourself ten years down the line. Most of us would have vague answers, since our goals are not clear. We don't know what we want to achieve and what we are working for. And no matter how much we struggle, working without a mission is like a ship without a helm. You'll never reach the shore if you don't have a direction in life. You should have well framed goals and the time horizon to achieve them, before investing for those goals.

Indecisive: Another major pit on our path to success is our inability to take decisions and to abide by them. At first, we are not able to decide whether to invest or not, then when to invest, and finally where to invest. And if at all we invest, we easily lose conviction in our decision and keep on changing our investment pattern, we sell what we have and buy something which our friend suggested. The cycle repeats in many forms and we end up wasting the time and efforts involved in making each investment. Result, we don't end up anywhere.

Personal life: Not having a happy married or family life, can be one of the biggest contributors to misery. It destroys your goals, your self confidence, your plans and your inner peace. In order to be wealthy, you have to start from your home and you have to maintain harmony and understanding in your relationships and invest time, care, love and concern in people around you.

Lack of patience: We all want to make money and make it quick. Unfortunately, financial success is all about patience and time. Once you invest, you have to be patient and see it rise and fall, until it reaches a point where it serves your purpose. Often a fall in the investment pulls the rug from under our feet, and this state of panic leads to wrong investment decisions. We have to control our emotions when the times are bad and wait till the clouds roll by.

Some people just don't want to take risk: Some people are adventurous, and invest in high risk high return products, and at times lose the principal as well. And there are some, who do not want to risk their money at all, even if their age and financial position allows them to take some risk, they won't. And both extremes, do not make money. Risk and reward go hand in hand, you have to take risk, to build your wealth, but it should be calculated on the basis of financial backgrounds, goals and risk appetite.

Standard of living: We tend to imbibe the standard of living of our acquaintances. We buy things which we do not require and we cannot afford, in order to maintain a lifestyle and social status. A Levi's jeans is equally good as a Diesel jeans and both serve the purpose, the reason spend Rs 16,000 on a Diesel jeans in the snob appeal it presents. If we cut down the expenses which are not necessary or stop paying a premium, not

for quality but for brand value, we'll be able to save a lot. And these accumulated savings, if invested wisely, will add to our better future.

Idle cash and savings A/c: Cash lying in a pot buried in your backyard or in your savings bank A/c is not building wealth for you. If you are keeping cash with a view to ensure safety and liquidity, you do not realize that the prices of consumer goods are increasing at around 7% annually and your savings bank balance, or worse, cash in that pot, are not increasing anywhere near the inflation rate. So, effectively, this idle cash is deteriorating with time. In fact the same can be also said for investments in Fixed Deposits of banks where post tax returns are less than inflation. You must direct it to a better return generating avenue, so as to at least cover the inflation rate. If you are looking for liquidity, investing in a liquid mutual fund is a better option.

Excess gold: Indians are obsessed with gold. We buy gold on every auspicious occasion and worse, we buy gold in jewellery form and we firmly believe that it is an investment which will protect us in case of emergencies. We pay huge making charges at the time of purchase, which is a total loss. We pay locker rents for ensuring safety of our jewellery. And in case an emergency arises, selling gold jewellery is considered ominous, and is the last resort to source money. And if all we have to sell, we pay wastage charges, which is again a loss. So, buying gold jewellery is not an investment at all. If you still feel that gold offers you protection, you can possess it in dematerialised form, you can invest in gold funds or gold ETFs. This will give you the benefit of availing the increase in the price of gold, no making or wastage charges, & no handling charges. The investors who are willing to overcome these personality traits will move towards their goal of becoming wealthy sooner than those who don't.

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